The Federal Reserve’s latest decision to maintain interest rates and not make any significant changes for the fifth time in a row has investors wondering what comes next. As Fed Jerome Powell provided little clarity on future rate cuts, it’s interesting to see how Bitcoin and the stock market will be affected as tariffs continue to kick in, and investors could be seeking to cash in profits.
Fed Maintains Restrictive Interest Rate Policy
During the Federal Open Market Committee (FOMC), Jerome Powell announced that the interest rate will remain steady in the 4.25%-4.50% range. This marks the fifth consecutive decision to keep rates unchanged, and it comes with remarks. Two Fed governors dissented from the majority position for the first time since 1993, both advocating for immediate rate cuts.
Fed Chair Powell characterized the current monetary policy as “modestly restrictive,” highlighting how, due to the economic resilience, it’s appropriate. Even with ongoing pressure from the White House and President Trump to lower borrowing costs, Powell emphasized that no official decision had been made about interest rates for the next FOMC meeting in September.
While many in the US administration want rate cuts, the Fed remains cautious, especially due to the uncertainty around tariffs and potentially rising inflation. Inflation is still above the Fed’s desired percentage of 2% and currently sits at 2.7%, which is likely making the Fed more cautious on how they tackle interest rates.
Key Factors Behind the Fed’s Cautious Approach
The Fed’s decision to stagnate and not lower interest rates stems from a number of economic indicators, such as inflation, labor market conditions, and primarily due to the uncertainty around tariffs and how it could affect consumers. Recent inflation data shows there’s ongoing price pressure across several sectors, with Jerome Powell highlighting that this is potentially due to the effects tariffs have on consumers.
The labor market reveals a paradox: while unemployment remains at historic lows, job creation and opportunities are stagnating. Federal Reserve Chair Jerome Powell notes that labor supply growth is also declining, partly due to changes in immigration policies, which are impacting the overall performance of the job market.
When discussing one of the key reasons for the delayed rate cuts, tariff uncertainty, Powell described the effects as “short-lived” but highlighted they could prove to be “more persistent.” This uncertainty contributes to the central bank’s wait-and-see approach, as officials prefer more data before making policy adjustments.
Bitcoin Responds to Fed Uncertainty
Bitcoin’s response to the Federal Reserve’s announcement underscored the cryptocurrency’s sensitivity to monetary policy signals. During the release of the FOMC meeting report, volatility surged, causing Bitcoin to dip by $115,700. However, the cryptocurrency quickly rebounded to its pre-announcement trading range of $118,410 after the Fed decided to maintain interest rates. This recovery suggests that while markets had hoped for rate cuts, the decision to hold rates steady offered some reassurance to crypto investors.
Following Federal Reserve Chair Jerome Powell’s comments, Treasury yields rose, with both 10-year and 2-year yields climbing. Meanwhile, the dollar strengthened to reach a two-month high, creating additional pressure on Bitcoin and other dollar-denominated risk assets.
Despite the short-term recovery, analysts remain cautious about Bitcoin’s vulnerability. If profit-taking accelerates, the cryptocurrency could face further declines, with support around $117,261 at risk. A drop below this level could push Bitcoin toward $115,000 or lower, adding to the challenges faced by the broader crypto market.
Leveraging the portfolio for volatility
For some investors, the FOMC meeting, along with additional data about inflation and interest rates, can create uncertainty. Even more so, smaller investors who don’t have time to follow or even learn what this means can still leverage their portfolio and stay profitable with Yieldfund. Yieldfund is a quantitative trading company that lets users invest in the crypto market without having to do the trading themselves. It provides three investment plans that can generate up to 60% yearly returns with weekly payouts directly to your USDC wallet. Find out how you can invest in crypto and diversify your portfolio without having to worry about market sentiment with Yieldfund.
